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This is a space for me to comment on Economics both in terms of the specific bits if economics, how the discipline works and the academic politics. I might also be tempted into talking about the economy!

Iran Update

Politics and the worldPosted by Huw Dixon Tue, July 09, 2019 12:42:31

Iran update.

Much has happened since the Tanker attacks (the drone shot down, the US attack cancelled 10 minutes before opening fire). On the Tankers, I think that on balance it probably was the Iranians. It was a calculated demonstration of what they could do, but with no loss of life. I think a “false flag” would have been more spectacular with some loss of life. There was a meeting of the UN Security council, called by the US, to discuss both the Tanker attacks and the drone that Iran shot down. Iran was excluded by the request of the US. The US ambassador, Nikki Haley’s successor Jonathan Cohen presented the US evidence on both counts: the Iranians were responsible for the Tanker attacks and the US drone was in international air space when shot down. The net result was disappointing for the US: the Security Council condemned the Tanker attacks but did not blame Iran. The three EU permanent members (Britain, Franc e and Germany) gave a joint press statement calling for “maximum restraint”. The US ambassador had to stand on his own simply repeating the US allegations. Worse still, the UAE has shifted its public statements.

In the earlier attacks on ships in Fujairah, the UAE had agreed with the Saudi government in blaming Iran. However, by the 26th June, it retracted the statement, saying “there is not enough evidence to suggest Iran carried out recent attacks on oil tankers in and around Gulf waters”. Worse still, the UAE is quietly withdrawing from the Yemen conflict (according to the Economist July 6th 2019). Probably their proximity to so many Iranian missiles has focused their minds against a conflict with Iran and the Economist reports growing dissatisfaction with the cost of the Yemen intervention. This is bad news for the Saudis (and their British and American backers): the UAE army is more effective than the Saudi forces, largely because it has a strong mercenary element. If the combined UAE-Saudi forces proved insufficient to defeat the Houthis, then the withdrawal of the UAE forces effectively means game over for the war in Yemen. The Houthis will retain their hold on northern Yemen and possibly recapture some territory. More importantly, if the UAE is drawing back to a position of neutrality vis a vis Iran, then this will make life much more difficult for the Saudi and US in the event of war with Iran. Currently Oman is “neutral”, although in the past both Saud and UAE have accused it of allowing the smuggling of weapons to the Houthis from Iran. It does host the US airforce as a “tenant” in a couple of bases (which were used in both Gulf wars), but in the event of war with Iran may not permit their use. Qatar is “neutral”, but subject to a blockade by the Saudis for over a year now. Qatar has remained friendly with Iran and whilst it would not side with Iran, it would certainly attempt to remain neutral (although the Al Udeid Air Base airbase in Qatar used by the US air force would almost certainly come under heavy attack if war broke out). Kuwait is also a friend of Iran and has been at the forefront of trying to mediate between Iran and the other Gulf States. Iraq has stated that the US cannot use its bases there to attack Iran. The Island of Bahrain is the only anti-Iranian part of the Gulf besides Saudi: it hosts a large naval base for US and Royal Navy ships and has had problems with its majority Shia population since the Arab spring. In the event of war with Iran, the US has little wiggle-room in the Gulf beyond the Saudi coast (ports of Al Jubayl, Ad Dammam and Dharan) and the island of Bahrain.

The US does of course have many bases bordering Iran outside the gulf: in Afghanistan, Pakistan and Turkmenistan. How useful these would be in an Iran-US conflict is doubtful, particularly if the host governments are not participating. Furthermore, in the two Gulf wars, with Nato support, the US was able to transport large quantities of men and material through Incerlik airport in Turkey and use European bases as stepping stones to the Gulf. Without the support of Turkey and NATO this would not be possible except perhaps on a small scale.

So, for me, if the Economist report is correct and the UAE is dropping out of the “coalition” that leaves just the US, the Saudis and probably Israel. The logistics of any war with Iran are formidable without more allies in the region and support from Nato. As an economist, I am interested because a war with Iran would be one of the biggest economic “shocks” since the Second World War, possibly as large as the OPEC shock in the 70s. The Iranians would be able to close the straits of Hormuz and destroy the existing infrastructure of the oil industry in Saudi Arabia. This would lead to a sharp reduction in the world’s oil supply and massive increase in the oil price. The shock would last for a long time. This could trigger a world recession, stagflation and much besides. Let’s hope it does not happen.

Sources mentioned in Blog.

Al Jazeera: “The foreign minister of the United Arab Emirates says there is not enough evidence to suggest Iran carried out recent attacks on oil tankers in and around Gulf waters.” June 26th.

https://www.youtube.com/watch?v=vJPM3fEYUYM

The Economist: The UAE begins pulling out of Yemen (July 6th)

https://www.economist.com/middle-east-and-africa/2019/07/04/the-uae-begins-pulling-out-of-yemen

Statements after the UN Security Council meetings (24th June 2019):

EU https://www.youtube.com/watch?v=lF_zFInaS7E&t=141s

US https://www.youtube.com/watch?v=68AVOuBg-ko

UN https://www.youtube.com/watch?v=A-2Z7wh0HbA&t=413s





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